11 the long-term care partnership insurance program in montana revised april 2013
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11
The Long-Term Care Partnership Insurance Program in MontanaRevised April 2013
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Services & Support: Chronic illness Disabilities Other conditions that be limiting physically or mentally
What is Long-Term Care?
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Statistics•Explore Quick Facts about Long-Term Care (LTC)
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Question: What percent of persons 65 & older are expected to need some type of long-term care?
1. 82%2. 70%3. 63%4. 45%
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Fact• 70% of persons
age 65 or older • Will need long-term care
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Medicare
•Generally doesn’t cover long-term care
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•Custodial Care•Activities of Daily Living
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Question: What was the average length of stay in nursing home in Montana for 2013?
1. 10.9 years2. 8.5 years3. 5.4 years4. 2.4 years
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Facts• Montana Average
Length of Stay (2013) 2.4 years 1 in 5 stay more than 5
years
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Question: What is the average monthly cost of nursing home care in Montana for 2013?
1.$8,589 2.$7,523 3.$5,955 4.$3,225 5.$2,987
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Average cost of care
• Montana (2013)(nursing home)
$5,955 monthly$71,456 annually
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Average Cost in Montana for 3 yrs• Individual$214,380
• Couple$428,760
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National AverageLong-Term Care ServicesRate Service
$19 hr Home Health Aide
$62 day Adult Day Care Center
$2,962 month Assisted Living Facility
$183 day$5,490 month
Semiprivate Room in Nursing Home
$204 day$6,120 month
Private Room in Nursing Home
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How can I provide for the cost of long-term care (LTC)?
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Ways to Afford LTC
1. Financial Resources Present Income Savings Investments
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Ways to Afford LTC
2. Real property Sell itAcquire reverse mortgage
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Ways to Afford LTC
3. Depend on:• Spouse• Adult Children
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Ways to Afford LTC
4. Apply for Medicaid• Must meet certain
federal & state eligibility requirements
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Ways to Afford LTC
5. Long-Term Care Insurance• Licensed Insurance
Agent• Group LTC
2020
Age When People Applied for LTC Insurance (2008)
35 – 44 6%
45 – 54 26%
55 – 64 50%
65 – 74 15%
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Private Long-Term Care Insurance-2008
•Who has?•12.4% of those age 65 & older
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Ways to Afford LTC
6.Montana’s New Long-Term Care Partnership Insurance Program
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Historical Background
• How did the LTC partnership insurance program develop?
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Concern at State & Federal Levels
• Increasing cost of Medicaid for long-term care for the elderly
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Question: On average what percent of nursing home costs were paid by Medicaid in Montana?
1.92%2.86%3.73%4.60%5.54%
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Who Pays• Medicaid
60% of LTC costs
• Nursing home residents
29% of LTC costs
• Medicare/Other 11%
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Federal Deficit Reduction Act of 2005
• States were encouraged to develop programs that would help reduce the growth of Medicaid expenses
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Montana Legislature (July 1, 2009)
• Responded with the authorization for a LTC insurance partnership program
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Montana Collaboration
• Private Insurance Companies
• Commissioner of Securities & Insurance (CSI)
• Department of Public Health & Human Services (DPHHS)
Montana Medicaid Program
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How does the Montana LTC partnership insurance program work?
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LTC Benefits• Assets up to the value of
the LTC partnership policy will not “count” when making eligibility determination for Medicaid
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• 72-year old widow• $50,000 CDs
Wants to leave CDs to grandchildren for
college
Example: Betty
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LTC Policy •Betty purchased a LTC partnership
insurance policy Benefit limit (pool)$100,000
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Benefits• LTC partnership
policy will cover the costs of Betty’s careUp to $100,000
benefit limit
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$100,000 Benefit Depleted
• Betty’s daughter contacted Office of Public Assistance • Medicaid
eligibility determination
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Daughter documents
• Betty purchased LTC partnership insurance policy
• Full benefit ($100,000) had been utilized
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Calculation• OPA excluded value
of Betty’s $50,000 (CDs) in Medicaid eligibility calculation
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Eligibility• Betty met other
eligibility requirements•Became immediately eligible for Medicaid
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Benefit to Betty• She was able
to keep $50,000 in CDs to leave to her grandchildren
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Why not just “give away” assets to become qualified for Medicaid instead of paying for a LTC partnership insurance policy?
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Give away assets• Federal & State laws
require a period of Medicaid ineligibility
5-year look-back rule
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Consequence• “Uncompensated
asset transfer penalty” • Result: “Ineligibility
period” before qualifying for Medicaid
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Calculation• Divide value of assets
applicant gives away • By monthly average
nursing home cost • Montana $5,955
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Revisit Betty• What if ?????• Betty had given
$50,000 to her grandchildren in an attempt to become “eligible” for Medicaid?
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Calculation$50,000 CDs
÷ $5,955 = 8.4 Betty has almost 8½
months of Medicaid ineligibility
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• How will Betty pay for 8½ months of care?
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Caution: Asset Protection• Available only
after all benefits of LTC partnership insurance policy have been utilized
4848
More Information• Medicaid & Long-
Term Care CostsMontGuide• Search by
MontGuide title • www.montana.edu
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Protect vs. Qualify• Purchasing LTC insurance
partnership policy may help protect assets• Does not qualify a
person for Medicaid coverage
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What companies are authorized to provide LTC partnership insurance policies in Montana?
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14 Companies As of April 2013
• Web site Search: Long-term care partnership
• Phone 1-800-332-6148
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LTC Partnership Companies
• American General Life Insurance
• Bankers Life & Casualty• Bershire Life Insurance
Company of America• Genworth Life Insurance
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• John Hancock Life Insurance (USA)
• Massachusetts Mutual Life Insurance
• MedAmerica Insurance• Mutual of Omaha Insurance • New York Life Insurance
LTC Partnership Companies
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• Northwestern Long-Term Care Insurance
• Prudential Insurance Company of America
• Transamerica Life Insurance
• United of Omaha
LTC Partnership Companies
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How can the financial stability of insurance companies be determined?
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Rating companies
• A. M. Best Company• Standard & Poor’s
Corporation• Moody’s Investor
Services
5757
Rate strength & viability to meet claims
• Investments• Reserve adequacy• Expense control• Underwriting
5858
American Association for Long Term Care
• Summary from•3 rating companies for several insurance companies
• See Page 4 of MontGuide
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What is the cost of a LTC Insurance Partnership Policy?
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Costs of premiums depends on
• Age at purchase
• Type of coverage
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2011 Montana Long-Term Rate Comparison Guide
• Rates for regular long-term care policy
• Can provide basis for comparison
• Available from Montana Commission of Securities & Insurance
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2011 Montana Long-Term Rate Comparison Guide
Company Age 55 Age 60 Age 65 Age 70
Assurity $252 $323 $407 $553
Bankers $523 $592 $711 $921
Berkshire $265 $336 $459 $709
Genworth $238 $288 $387 $527
Massachusetts Mutual
$237 $289 $367 $514
MedAmerica $320 $385 $479 $599
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2011 Montana Long-Term Rate Comparison Guide, con’d.
Company Age 55
Age 60
Age 65
Age 70
Mutual of Omaha
$299 $357 $482 $727
New York $214 $259 $332 $442
Northwestern $447 $510 $626 $845
Transamerica $358 $439 $556 $725
United of Omaha
$305 $364 $492 $741
United Security Assurance
$317 $366 $506 $707
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Clearinghouse
• National Clearinghouse for Long-Term Care Information•Address in MontGuide• page 5
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How much of my income “should” be spent on LTC insurance?
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Question: LTC premiums should consume no more than what percent of income?
1. 15%2. 10%3. 7%4. 4%
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National Association of Insurance Commissioners (NAIC)
• Recommends LTC insurance premiums should be no more than
•7% of income
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Example: Susan & Larry
• Joint income of $65,000• $65,000 X .07
$4,550 annually
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Example: Susan and Larry
$4,550 ÷ 12 = $380 Monthly premiums
should not be more than $380
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What questions should be asked before purchasing a LTC partnership insurance policy?
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Ask• Location
of care•Home•Assisted living facility •Adult day care•Nursing home
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Benefits paid
• Each day?• Monthly?• Elimination period?• Inflation adjustment?
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6 Resources are listed in MontGuide• Website is linked
within the MontGuide• Addresses to write• Phone numbers
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Are premiums paid for a LTC partnership insurance policy tax deductible?
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Federal Income TaxMaximum Tax Deductible Premiums
Attained Age of Individual Before Close of Taxable Year
Maximum Tax-Deductible Premiums (2012)
40 or below $350
41 – 50 $660
51 – 60 $1,310
61 – 70 $3,500
71 & above $4,370Note: These amounts are subject to change each year
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Example• Dan & Marlene
Paid $8,537 for LTC policies
Limit: $3,500 eachTotal: $7,000
($3,500 his + $3,500 hers = $7,000)
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Deduction• Exceed 7.5% AGI
$65,000 x 7.5% = $4,875
• Amount allowed for LTC $7,000 - $4,875=
• Federal Tax Deduction = $2,125 on Schedule A
• $2,125 x .15 = $319 TAXES SAVED
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Montana• Does not duplicate
federal rules!• Allows for a tax deduction of total amount premiums paid for LTC insurance•If you itemize
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Montana• Total amount
premiums paid for LTC insurance
Taxpayer Taxpayer’s parents Taxpayers grandparents
8080
Montana: Schedule IIIItemized Deductions Dollar for $ Not limited to amount above 7.5%
5. Medical insurance premiums not deducted on your return.
$ 0
6. Long-term care insurance premiums not deducted elsewhere on your return.
$8,537
Dan & Marlene $8,537
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Dan & Marlene Total Deduction Amount
FederalTax Bracket 15%
$2,125
Montana Tax Bracket 6.9%
$8,537
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Dan & Marlene Tax Savings
Federal $319
Montana $589
Total $908
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Are benefits from a LTC partnership policy taxable?
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Generally, NO• Limit is reimbursement
received from the larger of• Cost of qualified LTC• $310 per day ($113,150)• See form 1099-LTC
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Is a LTC policy purchased before program began considered a partnership policy?
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Purchased before July 1, 2009
• Policy could be eligible for designation as a LTC partnership policy
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Insurance Company
• Ask if company would agree that the policy could be:• Reissued• Exchanged
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Company submits Policy for Certification
• Montana Commissioner of Securities & Insurance
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After Certification
• Company should provide to insuredPartnership Status
Disclosure Notice
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Is a LTC insurance partnership policy purchased in another state certified in Montana?
9191
Another state?
• Policy can be designated as “certified” if person later moves to Montana
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Policy purchased in another state
• Montana Commissioner of Securities & Insurance (CSI) reviews policy Must meet all of following conditions:
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Condition in another state• Was insured person
a resident of partnership state when coverage first became effective?
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Definition• Does policy meet
IRS definition of a“qualified” LTC partnership insurance policy?
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Policy Date
• Was partnership policy date issued, re-issued, or exchanged after July 1, 2009?
9696
NAIC Rules• Does partnership
policy meet specific rules of the National Association of Insurance Commissioners?
9797
Does policy have an inflation rate clause?
• Age…Under 61 yrs •compound annual protection
• Age…61-76 •some level of inflation protection
• Age…Over 76 •inflation protection is optional
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What if I want to make changes to my LTC partnership insurance policy after it is purchased?
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Changes may
• Affect whether your policy continues to be certified under Montana law
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Consult Insurance Agent
• To determine the effect of proposed changes • Response in writing
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Summary:LTC Partnership Insurance Program• Helps Montanans
protect their assets against the cost of LTC!
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Summary:LTC Partnership Insurance Program• Eventually will save
state & federal government Medicaid expenses!
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MSU Extension
MontGuide Further information
•Long-Term Care Partnership Insurance in Montana
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Marsha GoettingExtension Family Economics Specialist
P.O. Box 172800Bozeman, MT 59717-2800phone: (406) 994-5695fax: (406) 994-4838
E-mail: [email protected]
MontGuide Co-authors
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MontGuide Co-authors Nancy Clark
Shannon MykinsBarbara Flamand Public Assistance Bureau
Montana Department of Public Health & Human Services
Christina Goe Montana Commissioner of Securities and
Insurance
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MontGuide Co-author Joel Schumacher
Montana State UniversityExtension Economics Associate Specialist
PowerPoint/Webinar Presentation
Keri D. Hayes MSU Publications Assistant
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Reviewers Reviewers of PowerPoint and
script: Jane Wolery-Teton County Extension Agent
Jesse Fulbright-Liberty County Extension Agent